[trealira]

2 years ago, Wharton predicted that the U.S. debt would be defaulted on in twenty years [0].

> Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation). Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies.

My prediction is that the deficit will continue to increase, and so the default will come by then or sooner.

[0]: https://budgetmodel.wharton.upenn.edu/issues/2023/10/6/when-...

[stephen_g]

Why would a currency issuer make the decision to default on bonds it's issued, when it can always issue new bonds and roll them over, or if it wanted to the Fed can always just buy the bonds back?

Don't think of the US (or any monetarily sovereign Government) as having the constraints of a household or business... It's fundamentally different and we make major errors (like the crazy idea the US would default) when we think of it in the wrong way...

[lossolo]

He answered your question:

> defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).

The real constraint isn’t solvency, it’s inflation and currency value. If deficits are monetized well beyond the economy’s capacity, inflation will rise and long term yields will climb, unless the central bank caps them, which then shifts the pressure to prices and the currency.

[Ekaros]

I question if it is possible to always roll over the debt. At some point too many think that it is better to buy any other asset. Ofc, with Fed and printing money you can enter to hyperinflationary circle. Which then makes rolling over debt even harder... Or getting any in future.

[2OEH8eoCRo0]

Didn't NYC have a crisis in 1975 where the banks didn't want to buy their bonds anymore?

[stephen_g]

NYC isn't a currency issuer. They don't control a central bank.